Trusts Aren’t Marital Property, Says Massachusetts Supreme Court

The Massachusetts Supreme Judicial Court in Curt Pfannenstiehl v. Diane Pfannenstiehl recently came to an important decision regarding how Massachusetts treats spendthrift trusts in divorce. By doing so, the court overthrew the controversial decisions of the lower courts, which would have radically adjusted the way trusts are viewed in Massachusetts. The function of these trusts is to protect beneficiaries from outside creditors and overspending, so it may be a relief to many that the Massachusetts Supreme Judicial Court has chosen to interpret the trust as the settlor intended it, rather than, as the lower courts did, viewing it as “property” that can be divided as a marital asset in divorce.

The case concerned a husband and wife who had an arrangement during the marriage to fund their daily living expenses from the husband’s trust. The husband’s income wasn’t sufficient to cover these expenses, and the wife had given up her career in order to look after the couple’s children. The couple used the trust to fund their lives year to year.

The Appeals Court relied upon the trusts “ascertainable standard” to determine that the trustees were “required” to make distributions to the husband Curt Pfannenstiehl. The reasoning behind this was that the trust was to provide for the welfare of the beneficiaries, and during the marriage, it was used to provide for the family’s living expenses. However the court’s interpretation seemed extreme, given that trustees generally have discretion in their distributions rather than being compelled to pay out. In addition, the Massachusetts Supreme Judicial Court disagreed with the lower courts’ opinion that the trust was a certain interest for Curt, instead viewing it as too speculative to be considered “property”. The Supreme Court also disagreed that Curt was entitled to a quantifiable fraction of the trust (the lower courts valued his interest as a simple 1/11th piece because it was shared with 11 other people) because of the history of how the trustees used their discretion to make unequal payments or no payments at all, and of course, the spendthrift clause, which means the trust isn’t supposed to benefit creditors or ex-spouses in the first place.

It was a good thing for Curt Pfannenstiehl that the courts ruled the way they did. When after trial, he was ordered to pay his ex-wife Diane approx. $1.4 million that he didn’t have and couldn’t earn, he was prosecuted for contempt after he couldn’t pay the judgement, and put in shackles. The Appeals Court reversed based on inability to pay, and the Supreme Court eventually decided not to treat the trust as marital property, but there was a brief moment when the protection the trust had seemed to offer Curt evaporated. Pfannenstiehl v. Pfannenstiehl shows that divorce has the potential to derail even the most painstaking plans parents have made for future generations. Thankfully, even in such a fraught situation, the courts have chosen to acknowledge that the original purpose of such a trust is to provide for future generations, and that this should be safeguarded.

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Sheryl Dennis is an expert in matters of trusts and estates. With over 24 years of experience in family law helping families resolve complex issues, Sheryl is the right choice for people looking to navigate sensitive family law issues related to estates, inheritances. Please contact Fields Dennis and Cooper today to see how we can help.

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Undue Influence and Estate Planning – What You Need to Know

When we think of “Undue Influence”, we think of contested wills, families divided and older, vulnerable people exploited by self-interested relatives. Declaring undue influence is often used as a reason to contest a will or estate plan, but there are two ways to consider undue influence in estate planning.

If you’re the one drafting a will or estate plan, it’s important to avoid any ambiguity about your estate planning decisions and who may have influenced them. When you distribute an inheritance in a way that’s uneven, questions of undue influence may be raised, especially if the main beneficiaries of the inheritance are involved in the estate planning process to the exclusion of the others. Things you can do to ensure that your wishes appear crystal clear to others and free of undue influence include getting a formal assessment of your mental capabilities before you draft estate planning documents and making sure family members aren’t present at discussions about your will with your attorney. This last step may need to be so clear-cut that you should avoid being driven or accompanied to your attorney’s office by a family member or loved one benefiting from your will.

If you are a family member that suspects undue influence, there are three things you need to be able to prove: firstly, that the affected family member or loved one was acting in an unusual way when he or she allotted property in the estate plan, secondly that the loved one or family member was frail, old, mentally incapable or in some way vulnerable to influence, and thirdly that the person who is alleged to have been the influencer had the opportunity to do so. In general the burden of proof in this situation is on the person or people who are asserting undue influence. Sometimes it works the other way, for example if the alleged influencer had a fiduciary relationship with the relative or loved one. This could include a child, spouse or agent under a power of attorney.

Some signs of undue influence include evidence of coercion or harassment, and also attempts to isolate the loved one or relative from other family members or friends.

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If you suspect undue influence or want to protect a will from being contested on grounds of undue influence, contact Attorney Sheryl Dennis. Attorney Dennis is highly experienced in the areas of estate planning and elder law. She can help you draft a will in which your wishes are clearly outlined or discuss with you the best way to challenge suspected undue influence. Please contact Fields, Dennis & Cooper today, to see how Attorney Dennis can help.

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Lessons in Estate Planning and Privacy from Harper Lee

Harper Lee, legendary and reclusive author of the literary classic, “To Kill a Mockingbird,” passed away in February 2016 at the age of 89. Though Lee fiercely maintained her privacy, she did publish another novel before the end of her life entitled “Go Set a Watchman.” As a result of her literary success, Lee reportedly made $3 million per year in royalties from book sales—just from “To Kill a Mockingbird.” Her estate may be worth an estimated $35 million or more.

What makes Lee’s estate planning a unique case study is, first, that she was not married nor did she have children. Therefore, no apparent, direct heirs exist. However, she did have family, who are still living, including a nephew. Most likely, the estate will be awarded to them. The second part of Lee’s unique and fascinating estate planning is that we don’t know if she set up trusts for her family. Wealthy people often set up trusts for family members, because trusts are kept private. A trust is a secure way to keep one’s finances and who receives the person’s assets after death private. For the author, who was named number four on TIME’s Top 10 Most Reclusive Celebrities list, she would doubtless have wanted to keep her affairs out of the public eye. We have no way of knowing whether Lee got her affairs in order before her death, and her case was certainly one in which not preparing an adequate estate plan would have been against the author’s wishes in life.

According to the American Academy of Estate Planning Attorneys, “A trust is the best way for celebrities and others to maximize their privacy. A will is a public document. Assets titled in the name of the individual are disclosed in a probate proceeding. But, if a trust is funded during lifetime, neither the assets owned by the trust, nor the terms of the trust, become public.” Thus, setting up a trust or trusts would have probably been a suitable course of action for Harper Lee.

At Fields and Dennis, Boston estate planning lawyer Sheryl Dennis is happy to set up trusts for those who want to preserve their privacy, even after they have passed on. As an estate planning lawyer, Sheryl understands that privacy is of vital importance, especially if a person has considerable finances and assets. She is a member of WealthCounsel, ElderCounsel and the Academy of Special Needs Planners. Please contact Sheryl Dennis today if you are looking to set up a trust.

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Estate Planning and Second Marriages

Maintaining an updated estate plan is an important aspect of financial care. It is especially important to update following a divorce and/or the start of a second marriage. Blended families and new marriages create an interesting problem for will-makers, as they must find a way to honor the new spouse and children without disregarding children from the previous marriage.

This sort of incorporation is a difficult and delicate task, but not impossible with the proper guidance. The key to success is fully understanding the current family dynamics of the client. Family dynamics can shift over time, and so providing grounded advice on how to pass down assets and what estate planning tools work best for the situation is crucial.

A spousal trust tool is one of the most useful tools; it ensures that the surviving spouse will have access to trust assets during their lifetime and that these remaining assets will pass onto the children of the predeceased spouse. This form of trust allows for rollover treatments and graduated rates of taxation. Other estate planning tools could include careful splitting of assets, and the designation of life insurance to children.

At Fields and Dennis, we treat our clients with the utmost respect during the delicate process of estate planning. We are a trusted firm that openly communicates with our clients during this planning process. Please contact us today if you are looking for a trusted and strategic Boston divorce lawyer.For more on estate planning in a second marriage:

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Sheryl Dennis on Legacy Planning in Lawyers Weekly

Sheryl Dennis was recently quoted in the March 12, 2015 issue of Massachusetts Lawyers Weekly. Attorney Dennis was consulted on digital legacy planning as it pertains to a new Facebook feature that allows individuals to choose a “legacy contact” to manage their account in the event of their death.

The article, “Estate planners welcome Facebook’s new legacy feature,” by Pat Murphy discusses the importance of accounting for your digital assets as part of your estate planning efforts. With so much of our lives online, it is essential to consider what will become of this presence once we are no longer around to manage it.

Previously, Facebook would “memorialize” accounts after being notified of a user’s passing. While the page would still be live and viewable, it could not be formally managed.

With Facebook’s new “legacy contact” feature, a person can be designated to manage an account, accept friend requests, update profile photos and post information.

Lawyers Weekly asked Attorney Dennis to weigh in:

“Wellesley estate planning attorney Sheryl J. Dennis says she would certainly advise her clients to take advantage of Facebook’s new feature, noting it’s often very difficult to get online companies to act in accordance with the wishes of a personal representative or an agent under a durable power of attorney once a person is either incapacitated or deceased.

‘If this actually allows more control to the descendants and to the personal representative, then that is very good,’ Dennis says.”

The entire article is available on Massachusetts Lawyers Weekly.

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The Tax Responsibilities your Family May Be Overlooking

As the year comes to an end, you may be accessing your financial plan in preparation for the New Year. While tax planning is something most working adults are generally informed about, there are tax obligations that some may not be fully aware of. If you have young children, it could come as a surprise that they may have US tax obligations of their own. If your child has earned income or even has unearned income in their name, they should be filing a Report of Foreign Bank and Financial Accounts or FBAR.

In order to learn whether your dependent should be filing a tax return, you need only look at their gross income. If a child has a part-time job and has earned income for the past year, in excess of $6,100 they are required to file an FBAR.

But, if a child has a gross income that is unearned and the result of dividends, interest, etc., they must file a tax return if the gross amount is over $1,000.  When thinking about a child’s unearned income, it is also important to consider “Kiddie Tax.” If a child’s unearned income reaches a certain maximum, the income over that number starts being taxed at their parent or guardian’s tax rate. The Kiddie Tax was introduced to take into account high-net worth families who may gift assets that appreciate in value or produce income to their children, who could earn dividends taxed at a lower rate.

If a child has accumulated unearned income and is subject to the Kiddie Tax, there are some things you should keep in mind.

If the amount of unearned income is under $10,000, filing an FBAR can be avoided if the income is included on the parent’s tax return. There are special circumstances in which this is not an option, including if the child’s income is capital gains from the sale of securities.

If a child’s unearned income equals more than $2,000, part of this income may still be taxed at the parent’s rate, regardless if they file an FBAR or the income is included on their parent’s return. If a child has income in foreign financial accounts, they are also required to file Form 8938 (Statement of Specified Foreign Financial Assets). This is in addition to the FBAR and does not replace it.

New FBAR instructions added in 2014 highlight the importance of filing a tax return for a child who has income, whether earned or unearned. It should be noted that if a child is not old enough to file their own FBAR, a parent or guardian is legally responsible for filing the document for the child. Similarly, if a child’s age prevents them from signing their name, a parent or guardian may electronically sign the document.

To learn more about your child’s potential tax responsibilities, consult a tax professional for more information.

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Estate Planning Advice on Disinheriting a Child

When considering your estate plan, one of the things you will have to think about is who your beneficiaries will be. If you have a significant estate, this decision is made even more complex.  How will you divvy up your assets, who will receive an inheritance and are there those who you will deliberately exclude?

The decision to leave close family members out of your estate plan is one wrought with difficulty, and it is without doubt an emotional experience. It is surely not a decision made lightly, and it brings with it a lot to think about from a personal and legal standpoint. For the sake of this discussion, we will refer to disinheriting a child, but the advice is also applicable to other close family members.

You certainly have your reasons for disinheriting a child or choosing to leave them out of your estate plan. Maybe they are not particularly smart with money and you feel they wouldn’t properly handle the inheritance. Maybe they have an addiction to drugs, alcohol or gambling that you do not want to financially support.

If you do decide to disinherit your child, it should be handled carefully so that your wishes are upheld in the chance that the child should contest your will. Be meticulous in documenting your decision to disinherit. Be sure to give proper proof that you are of sound mind when making the decision. An interview video of you at the time of signing the will, in which you comment on your decision, can be helpful, as can letters from your primary care physician establishing your health and ability to make decisions.

Ultimately, your decision to leave a child out of your estate plan is not done out of malice. And, there are other options that you may want to consider. If your son or daughter has a family of their own, you could use a “Skip Bequest” to leave a share of your estate directly to your grandchildren in a trust with another close family member named as trustee.  This may be an agreeable compromise – providing for your loved ones, while still maintaining the integrity of your decision to disinherit.

Similarly, if the reason for disinheriting a child is a current circumstance, such as a lack of direction or motivation, a poor grasp on handling finances, and/or a destructive addiction, you may want to consider an Incentive Trust. With an Incentive Trust, you can put conditions on the receipt of trust benefits. If they hold a steady job, for example, or remain drug-free for a set period of time, they would become eligible to receive benefits.

One important thing to remember is that leaving a child out of your estate plan does not mean leaving them out completely. Be sure to mention them by name. If you fail to mention them, a court may consider this to have been an inadvertent mistake and insert them as an heir. Additionally, it may not be smart to leave them nothing. While it may seem counterintuitive, if you have a No Contest Clause in place, it could be in your best interest to leave the disinherited child a small amount. A No Contest Clause works to discourage heirs from contesting a will by stating that anyone who unsuccessfully challenges the will, likely for a bigger piece of the estate, will get nothing. A disinherited child will have nothing to lose by contesting your decision, but if left a small amount they will be risking something – and may be more likely to cut their losses.

Disinheriting a child or other family member is a big decision and one that should be approached from a variety of angles. Consult an estate planning attorney to discuss your options, so that your estate is handled as you wish.

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3 Easily Avoidable Estate Planning Mistakes

Estate planning is not a topic that many like to think about. After all, planning for our death can be a morbid way to pass the time. But, instead of thinking about the negative, it is important to remember the positive attributes of estate planning – namely, the security and future well-being of your family and loved ones.

Many are intimidated by estate planning, assuming that it is a complicated task and one they needn’t worry about if they do not have a high-net worth estate. Yet, that is untrue, and one of the primary estate planning mistakes people make.

Everyone should have an estate plan, regardless of tax bracket. And, if you have engaged in some form of estate planning, you have already managed to avoid this mistake.

Here are 3 other estate planning mistakes that you can easily avoid:

Don’t let the size of your estate justify cutting corners with your estate plan.

Even if you are not wealthy and do not have an abundance of property or assets, there is no estate too small to justify not having a comprehensive estate plan. Without a formal will, power of attorney and health care proxy, you are not able to guarantee that your wishes are carried out. Leaving your legacy to chance can result in a complicated mess after your death, leaving loved ones to deal with the fallout. Many individuals who have (what they believe to be) simple financial and family situations attempt DIY estate planning, but mistakes can happen and may result in costly errors. Regardless of the size of one’s estate, having your will and other estate planning documents handled by an experienced estate planning attorney is the only way to assure peace of mind to yourself and your loved ones.

Don’t create an estate plan and think the job is done.

While taking the time to create an estate plan is more than half the battle, it is important that you reevaluate your plan from time to time, especially when the circumstances of your life change.  Life events that may require changes to your estate plan include marriage, divorce, remarriage, birth of children, the death of a beneficiary or trustee, changes to wealth or acquisition of new property or assets. Keeping your estate plan updated will prevent problems after your death and will make sure that all of your loved ones are provided for according to your wishes. Keeping the beneficiaries of your life insurance policies and retirement accounts updated is similarly essential.

Don’t forget about digital assets.

While estate planning may conjure up images of bequeathing tangible assets, there is another provision you should make it a point to touch upon in your estate plan. Your online presence is larger than you may think. With social media accounts, online credit and bank accounts, Bitcoin, digital downloads, music library, cloud-based storage, e-mail addresses and other digital assets, proper measures should be taken to deal with these assets if you are impaired. Leaving directives for the handling of these assets is important, as is making sure the accounts and passwords are available to your power of attorney or other chosen individual.

Estate planning is important, and regardless how simple you believe your financial situation may be, there are a number of concerns that require attention. We’ve touched upon a few of them here, but be sure to go over your full estate plan with an estate planning attorney to ensure that your legacy is secure and your family and loved ones are provided for.

The estate planning attorneys at Fields and Dennis, LLP have experience in the preparation of simple wills, as well as sophisticated trust arrangements designed to accomplish complex goals. Our estate planning lawyers can discuss your unique concerns and make sure that your plan takes into account all aspects of your estate.

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Back-to-School Estate Planning for College Students

At the start of the summer, we shared important information for parents and grandparents with loved ones turning 18. These estate planning tips are especially important to consider as students head to college this September.

Back-to-School planning can be a whirlwind, and while this planning typically involves stocking up on bulk cases of ramen noodles and extra-long sheets, it should also include a real conversation about what it means to be eighteen and away from home (most likely, for the first time).

Your eighteen-year-old child or grandchild may be so excited to start their college experience, that they may not be aware of how their changing legal status will impact them in a variety of ways.

The fact is, as legal adults, medical records will not be accessible to parents or guardians, and they will no longer be able to make health care decisions or receive admission information from hospitals if there is an accident. When a teenager leaves home for college, they may be legally an adult, but parental guidance is still important and necessary. Without taking a few easy planning steps, parents will be unable to help their child with medical or financial decisions. So, before you load up the car with mini fridges and microwaves, a pit stop at your estate planner should be at the top of your list of things to do.

Here are the documents everyone over the age of 18 should sign:

  • A Health Care Proxy and HIPAA Release
  • Durable Power of Attorney

A Health Care Proxy and HIPAA Release are necessary to make medical decisions and receive medical information for someone over the age of eighteen. Being away from home at eighteen years old can be an exciting prospect, but it can also be intimidating and a bit scary for those who have lived at home up until this point. Having a Health Care Proxy and HIPAA Release can alleviate some of this anxiety. The fact is, a quarter-million young adults (ages of 18-25) are hospitalized in America with non-lethal injuries every year. With these documents in place, parents and guardians can be there for their loved ones without needing a court to intervene.

The power of attorney is also important, especially if financial help is still being provided to the student, which is often the case when children are in college. While many young adults will be willing to sign this document for the security and assurance that it provides a family, there are others who may be skeptical. One reason for this hesitance is that a durable power of attorney will give unlimited access to a student’s records, including their grades and transcript. Speak with your child about the reasons that a power of attorney is important, and most likely the good it provides will outweigh their hesitation.

While Estate Planning sounds like an unnecessary prospect for a college-age adult, these documents will provide peace of mind for both parent and student. Send your children back to school with confidence, knowing that while they further their education and explore their independence, you will still be there to support and care for them when they need it.

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